If you’ve inherited a property and are planning to sell it, it's important to know that while the inheritance itself isn’t taxable, the sale is. The profit you make becomes subject to capital gains tax, and understanding how this tax works can save you a significant amount.

Let’s simplify how capital gains on inherited property are calculated, what counts as long-term or short-term, and how indexation helps reduce your tax liability.

When you sell an inherited property, the tax you pay depends on the holding period. But here’s a key detail — the holding period isn’t from the day you inherited the asset. Instead, it’s counted from the date the original owner bought it.

• Long-Term Capital Gains (LTCG): If the property has been held for more than 24 months, the gains are treated as long-term. LTCG is taxed at 20%, but you get the benefit of indexation — a method to adjust the purchase price to account for inflation.
• Short-Term Capital Gains (STCG): If the total holding period is 24 months or less, the gains are considered short-term and taxed as per your income tax slab.

Looking to reinvest the proceeds from your property sale?
A Bajaj Finance Fixed Deposit offers one of the highest FD rates in the market — up to 7.30% p.a. — with a flexible tenure and the trust of a AAA-rated issuer. Open a Bajaj Finance FD Account.

Although you won’t pay any tax when you inherit a property, capital gains tax becomes relevant when you sell it. Here’s how the gain is computed:

Step-by-step Capital Gains Calculation

1. Determine the Holding Period:
   Count the total period from the date the original owner purchased the property.
2. Apply Indexation (if LTCG):
   Inflation affects property values. Indexation helps adjust the original purchase price using the Cost Inflation Index (CII) published by the Income Tax Department.
3. Calculate Capital Gains:
   Use this formula:
   Capital Gains = Sale Price – Indexed Cost of Acquisition

Not planning to use the sale proceeds immediately?
Put your funds to work with the Bajaj Finance FD and earn up to 7.30% p.a. returns. Start Saving Now!

Let’s assume you inherited a property in 2012, originally purchased by your parent in 2001 for Rs. 8 lakh. You sell it in 2018 for Rs. 30 lakh.

Indexed Cost of Acquisition:

• CII for 2001-02 = 100
• CII for 2018-19 = 280
• Indexed Cost = ₹8,00,000 × (280 ÷ 100) = ₹22,40,000

Capital Gain:

• Sale Price = Rs. 30,00,000
• Indexed Cost = Rs. 22,40,000
• LTCG = Rs. 7,60,000
• Tax Payable @ 20% = Rs. 1,52,000

So, you’ll pay Rs. 1.52 lakh as long-term capital gains tax.

Want to avoid market volatility post-sale?
Secure your wealth by laddering your investments with Bajaj Finance FDs across different tenures. It helps you meet financial goals while maintaining liquidity. Ladder your FD investments. 

Indexation lowers your taxable gain by increasing the cost of acquisition to match inflation. Here's the formula:

Indexed Cost = Original Cost × (CII of Sale Year / CII of Purchase Year)

This adjustment ensures you’re taxed only on your real profit, not on inflation-induced price increases.

Prefer lump sum safety with zero market risk?
Bajaj Finance Fixed Deposits come with AAA/STABLE ratings by  CRISIL  and ICRA, making them one of the most secure fixed-income options in India. Open FD. 

Selling an inherited property can lead to sizeable profits — but also tax obligations. While you don’t pay anything when you inherit, capital gains tax applies once you sell. By using indexation and understanding the holding period, you can reduce the tax burden significantly.

And once the deal is closed, don’t let that money sit idle. Reinvesting in a Fixed Deposit helps preserve your wealth and grow it safely over time. With competitive returns and flexible tenures, Bajaj Finance FDs are one of the smartest post-sale moves you can make. Invest now!